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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (32859)	6/18/2001 4:18:19 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69169

NT Pre-warning CC Notes: Management was on the defensive the whole call even though no one was asking the tough questions. Not a good sign. Optical backbone represented 25 percent of sales last year. Much of that evaporated at customers focused on efficiency. ISP's and CLEC's going bankrupt allowed carrier to re-deploy terminations. Bankruptcies remove high load terminations/customers. Taking a 950 mil dollar charge. 350 in inventory write offs. 650 charge in unspecified charges. Gross Margin expected to be 12 percent after adjustments. 25 percent work force reduction overall. Removing 33,000 sq feet of production facilities. Closing broadband and narrow band access operations due to low margins. 750 mil write down on Promintory and Sonoma acquisitions to reflect new market value. 12.3 bil dollar charge to reflect the write off of good will from acquisitions over the last few years. [This one is huge, I wonder why CSCO did not do the same?] Obtained a new 2 bil dollar credit facility to help with transition. No dividend after June 29. NT expects overall loss of 19.2 bil in Q2 of 2001. 15.1 bil in good will write offs. Reducing investments in non-core businesses. Visibility still non-existent. Those who have capital are not expanding. They are looking for greater efficiencies in their networks or leasing excess capacitiy from competitors. The focus is on profitability. Focus of NT will be metro optical, core internal networks (includes wireless especially 3G) and core optical backbone. Circuit terminations which were a large amount of rev last year declined dramatically as carriers re-deployed unused equipment due to drop in demand. Wireless is still growing. Impacted by techncial problems in 3G. Carriers looking for NT to deploy 3G in shorter period of time. [Need to conserve cash to very last minute?] Metro growing but with limited capital. [This does not seem to be affecting CIEN, ONIS and RSTN. Why?] Expect networks to begin expanding again some times next year. US business was a disaster. European market and all world wide markets are seeing the same effect. Europe was not as aggressive as the US, but a lot of 3 G licenses were bought. The technical problem with 3G prevent them from making money on the 3 G services currently. Ratings on carriers is an issue. 1.2 bil in cap ex budget. 950 mil spent so far. Use the rest to consoldate operations and add efficiencies. Reducing financing commitments. Will wait for better IPO market to spin off optical component business. Looking at other opportunities. 2.5 bil in vendor financing at end of last Q. Expect the 3 bil expected in this Q to be reduced. Looking for July 1999 levels. No abnormal pricing pressure in long haul or metro optical. CLEC's were 25 percent of rev. This has fallen in last 6 months. No longer looking at incremental sales with CLEC's. Too low margin. 12 carriers account for 80 percent of cap ex. This is about what NT business is approximately. May be a bit lower. Total credit facility: 2 bill new added. 1.5 bil in bonds recently. and 1.2 bil in CP? paper (offset by 1.4 bil in cash). Tax rate is the same as before in the Q. 4.5 bil in rev in Q. Including discontinued operations 4.9 bil in rev. No comment in whether wireless, WAN or wireless switching is up Q-Q. Last year saw IP traffic going at 10 percent Q-Q. First Q we have seen a single digit decline. [Briefing.com story not accurate. Claimed 10 percent decline.] ISP bankruptcies part of issue. Ecnonmy is still growing though so demand will come back. [Question: where did all the old ISP customers go.] Termination being re-deployed by carriers as result of ISP bankruptcies. Carriers searching for efficiencies this Q. They found them. Example: one customer projected 350 mil in orders. Due to efficiency gains only order 1/4 of amount. 85 percent of financing was to RBOC's. 15 percent to small CLEC's. 25) mil write off addresses the CLEC issue. Still have a 500 mil dollar commitments on the books. New 20 bil years run rate to be profitable. [Management could not explain if this was cash flow or rev. nor did they give assumption that would validate that as mix will be part of the equation.] Bottom line managment gave no indication they can achieve profitability even if they hit a 20 bil rev target.